By Ben Levisohn

One of the market’s strongest groups–the airlines–has run into turbulence today after Imperial Capital reduced its estimates for American Airlines (AAL).

Bloomberg

Shares of American Airlines have dropped 4.2% to $35.35 at 1:10 p.m. today, while United Continental (UAL) has fallen 2.8% to $43.28, Delta Air Lines (DAL) has declined 3.4% to $33.55 and Southwest Airlines (LUV) is down 3.3% at $23.35.

Morgan Stanley’s John Godyn and team explain the recent volatility in American Airlines, Delta Air Lines, United Continental and Southwest Airlines, among others:

[We] noted that 1Q’s severe weather events had not yet been fully incorporated into consensus and highlighted [American Airlines, JetBlue (JBLU), Spirit Airlines (SAVE), and United Continental] as the stocks with the largest gap vs. consensus. However, as we’ve said consistently YTD – we’d treat weather-related weakness as a buying opportunity. Along these lines, we’ve argued that moderating fuel and re-accelerating PRASM growth drive upside to 2Q guidance, which should prove to be a more important driver of shares through earnings in conjunction with the prospect of rising capital returns at a number of airlines including [Alaska Air (ALK), Delta Air Lines and Southwest Airlines].

Adjusting 1Q14 and full year estimates to reflect updated operating guidance. Prior to the market open on 4/8/14 American Airlines Group released March traffic and updated operating guidance for 1Q14 and full year 2014. Management indicated that 1Q14 operations were significantly impacted by severe winter weather during the quarter resulting in the cancellation of more than 34,000 flights. These cancellation reduced revenue by $115mn and operating profit by approximately $60mn. In terms of unit revenue, PRASM is expected to increase between 2.5% and 3.5% from 1Q13 levels…Operating margins are expected to be between 5.0% and 7.0% for 1Q14. This compares to our revised estimate of 5.5%. As a result of these changes, we are lowering our 1Q14 EPS estimate to $0.45 from $0.66. Our 2014 EPS estimate is lowered to $5.75 from $5.78.

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APRIL 10, 2014 3:14 P.M.

jay brown wrote:

This sector is at its profit max service ceiling. It cannot climb any higher with debt load and expectations that everybody will be doing even more travel when the economy soars. Aint gonna happen. Sell now. Puts are loading up down the year.

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Earnings reports, corporate strategies and analyst insights are all part of what moves stocks, and they’re all covered by the Stocks to Watch blog. We also look at macro issues, investor sentiments and hidden trends that are affecting the market. Stocks to Watch gives you the full picture of the U.S. stock markets, all day long.

The blog is written by Ben Levisohn, a former stock trader who has covered financial markets for the Wall Street Journal, Bloomberg and BusinessWeek.